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    Corporate / Modelling

    Three-Statement Model

    A five-year projection where the three statements tie: net income flows to retained earnings, and the cash flow statement explains the change in cash. Small model, correct mechanics — which is the part most spreadsheets get wrong.

    Year 1 EBITDA$15.0MYear 1 net income$6.0MYear 5 revenue$157.4M
    Year 1 EBITDA
    $15.0M
    15.0% margin
    Year 1 net income
    $6.0M
    6.0% net
    Year 5 revenue
    $157.4M
    12% a year
    Year 5 net income
    $9.4M
    Margins held flat
    Five-year projection
    Revenue grows, margins hold, working capital scales with revenue.
    Five-year projection
    YearRevenueEBITDANet incomeCapexCash flow
    Y1$100.0M$15.0M$6.0M$5.0M$5.0M
    Y2$112.0M$16.8M$7.0M$5.6M$5.9M
    Y3$125.4M$18.8M$8.1M$6.3M$6.8M
    Y4$140.5M$21.1M$9.3M$7.0M$7.9M
    Y5$157.4M$23.6M$10.7M$7.9M$9.2M
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    Revenue and net income
    Constant margins mean both lines grow at the same rate.
    Revenue and net income0.0005.2910.5715.8621.1526.43Y1Y1Y2Y2Y3Y3Y4Y4Y5Y5Three-Statement Model
    Canonical equations
    The exact relationships implemented by this engine.

    revenue·(margin − opex%) · Operating profit before D&A.

    (EBITDA − D&A − interest)(1 − tax) · Flows to retained earnings.

    NI + D&A − capex − ΔWC · The bridge to the balance sheet.

    finance methodology

    A clear path from inputs to results.

    A five-year projection where the three statements tie: net income flows to retained earnings, and the cash flow statement explains the change in cash. Small model, correct mechanics — which is the part most spreadsheets get wrong.

    Step-by-step methodWorked exampleAssumptions explained

    How to use

    1. Set year 1 revenue ($m).
    2. Set revenue growth (%).
    3. Set gross margin (%).
    4. Set operating costs (% of revenue).
    5. Read the headline metrics, then check the table for the detail.

    The formula

    revenue⋅(margin−opexrevenue·(margin − opex%)

    Reference: Income statement, cash flow and balance sheet from one set of drivers (Brigham & Ehrhardt, Financial Management).

    Worked example

    At the default inputs

    Inputs
    • Year 1 revenue ($M): 100; Revenue growth (%): 12; Gross margin (%): 45; Operating costs (% of revenue): 30; Depreciation (% of revenue): 4; Opening debt ($M): 50; Interest rate (%): 6; Tax rate (%): 25; Capex (% of revenue): 5
    Calculation path
    1. 1

      Year 1 EBITDA: $15.0M · Year 1 net income: $6.0M · Year 5 revenue: $157.4M · Year 5 net income: $9.4M

    Result

    Year 1 EBITDA: $15.0M · Year 1 net income: $6.0M · Year 5 revenue: $157.4M

    Interpreting the result

    Year 1 EBITDA is $15.0M on $100.0M of revenue, growing at 12%.

    Assumptions & limitations

    • Constant margins and growth.
    • Working capital held at zero for clarity.

    Frequently asked questions

    Do the statements tie?

    Yes by construction: net income flows to retained earnings and the cash flow explains the change in cash.

    What is missing?

    Working capital, debt amortisation and a full balance sheet schedule.

    Methodology last reviewed 2026-10-22. Results are informational and not financial or engineering advice — see our disclaimer.